Here on the blog, I’m going to try to tackle a few Nashville insurance questions that I get asked routinely by clients and prospective clients. One of the most common: When should I take my grown kids off my car insurance policy, and push them to get their own?
The answer, in my opinion, is like most answers when it comes to insurance: It depends.
There’s no across-the-board “best” approach, here, but there probably is an approach that’s best for your situation, and your child’s. By and large, you need to weigh out a few key factors to make this decision.
Here’s what I’d think about, and where I’d start a pros/cons list:
Your child’s age
Some parents think of age 18 as the bringer of all things responsibility — you’re now legally an adult, so you should be responsible for your adult things, like insurance. I get that thought.
But let’s say we’re looking at things from a family standpoint, in a purely dollars-and-cents way.
Insuring a young driver is expensive, however you cut it. If you add your 18-year-old to your policy, it can make the rates jump as much as 80 percent, according to a 2015 study. Yiiiiikes.
That said, your increase is still often less than what the teen’s own policy would cost. According to that study, the cost of an individual policy for an 18-year-old driver would be almost 20 percent more than the jump in a parents’ policy.
When your son/daughter turns 25, however, rates tend to drop considerably. So if you’re just looking for a basic lower number, waiting until that 25th birthday might be your best bet.
Whose name the car is under
This one’s more cut and dry. If your son/daughter is driving a car registered in your name, you can opt to keep him/her under your policy. It might make sense to, since you have a financial stake in the vehicle.
But if your child registers a car in their own name, they’ll need to get their own insurance policy.
This is something you might want to talk about if your child is going off to college in another state, and wants to establish residency there. Registering a car in their name in the new state is a step in that direction.
Your child’s credit history
We know how important good credit history is — on top of a kajillion other things, credit problems can make your insurance payments increase.
At 18, though, your credit is, at least by the credit bureaus’ metrics, bad. In that it’s nonexistent. Establishing adult stuff like paid insurance bills in your name helps establish a credit history. So if this is something you/your child want to start working toward early, an insurance policy can be helpful — especially if we work on getting them well covered, like with a car insurance/renters insurance bundle.
Your child’s driving record
This is kind of a delicate topic to tackle, but it’s a real thing that you have to consider. If your teen/early-20s driver is, let’s say, not the most conscientious behind the wheel, it affects rates in a big way.
The more violations on your child’s record — speeding tickets, accidents — the more of a risk insurers see, and the higher rates tend to go. (Here’s a more thorough rundown of things that can make car insurance rates rise.)
So, here’s what you have to consider: Do you want to absorb those increased rates, or do you feel it’s your child’s responsibility? Can your child afford to absorb those rates?
Whichever way you decide to go, more money’s going out the door. It’s basically a case of where the bills are being sent.
There are benefits, for you and your child, to sticking with your policy. Higher rates might mean your kids end up choosing a policy with insufficient liability coverage. You, on the other hand (especially if you heed my advice), probably have more extensive coverage that could protect him or her from a lawsuit.
I know this seems like a lot of factors to juggle. It’s why I’m here: I can help you weigh all of this stuff out, and find a balance that works for you.
If you’re shopping for insurance in Nashville, I’d love to help make it easier for you. Here’s a little bit about why I think working with an independent agent like me is better than the DIY route. I know I’m biased, but this conclusion is part of why I went into this business. I’m an agent, and a believer.